Correlation Between Citigroup and Relief Therapeutics

Can any of the company-specific risk be diversified away by investing in both Citigroup and Relief Therapeutics at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Citigroup and Relief Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Citigroup and Relief Therapeutics Holding, you can compare the effects of market volatilities on Citigroup and Relief Therapeutics and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Citigroup with a short position of Relief Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Relief Therapeutics.

Diversification Opportunities for Citigroup and Relief Therapeutics

0.3

Correlation Coefficient

Citigroup  Relief Therapeutics

Weak diversification

The 3 months correlation between Citigroup and Relief is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Relief Therapeutics Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Relief Therapeutics and Citigroup is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Citigroup are associated (or correlated) with Relief Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Relief Therapeutics has no effect on the direction of Citigroup i.e., Citigroup and Relief Therapeutics go up and down completely randomly.

Pair Corralation between Citigroup and Relief Therapeutics

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.12 times more return on investment than Relief Therapeutics. However, Citigroup is 8.01 times less risky than Relief Therapeutics. It trades about 0.23 of its potential returns per unit of risk. Relief Therapeutics Holding is currently generating about -0.07 per unit of risk. If you would invest  6,860  in Citigroup on September 20, 2024 and sell it today you would earn a total of  252.00  from holding Citigroup or generate 3.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  Relief Therapeutics Holding

Citigroup

Risk-Adjusted Performance

10 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Relief Therapeutics

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Relief Therapeutics Holding are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Relief Therapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Relief Therapeutics

The main advantage of trading using opposite Citigroup and Relief Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Relief Therapeutics can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Relief Therapeutics will offset losses from the drop in Relief Therapeutics' long position.

The idea behind Citigroup and Relief Therapeutics Holding pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.